Japan's Nikkei share average jumped more than two percent on Monday, driven by strong gains in chip-related stocks that mirrored recent advances among U.S. semiconductor companies. The rally underscores how closely Japan's chip equipment and test companies, which supply global semiconductor manufacturing, track demand sentiment set in the U.S. market.

Investors showed a healthier appetite for risk, supported by steady bond yields and a firm yen, as market volatility eased. A firmer yen is generally a supportive factor for sentiment toward Japanese equities from foreign investors, while steady yields reduce pressure on rate-sensitive valuations.

Among individual semiconductor-related names, Advantest, a major chip testing equipment maker, and Tokyo Electron, one of the world's largest suppliers of semiconductor fabrication equipment, each rose more than four percent. Kokusai Electric surged eight percent, boosted by its new inclusion in the Nikkei 225 index. Index inclusion often drives buying from passive funds that track the benchmark, as their portfolios must be adjusted to reflect the new composition.

The session's gains mark a recovery in appetite for Japanese equities after the recent stretch of volatility, with investors watching whether the momentum in chip-related names, which carry a heavy weight in the Nikkei, can be sustained.

Source: Economic Times Markets